Many of our client agreements are on auto-renew month-to-month terms, which our sales team prefers. How do we transition these to long-term locked contracts on our exit runway without alienating our customer base?

Question

Tyler Smith · Accepted Answer

Month-to-month contracts might make your sales process easier, but they represent a major risk to institutional buyers who value revenue predictability above all else. To maximize your valuation on your exit runway, you must convert these loose arrangements into formal, long-term agreements. Begin this transition at least eighteen to twenty-four months before you plan to go to market. Have your sales seat on the Accountability Chart design an incentive program to encourage clients to sign annual or multi-year contracts. You can offer modest price freezes, priority support, or exclusive access to new automated features in exchange for a committed term. Focus on securing your top ten clients first, as they represent the bulk of your enterprise value. Ensure these new contracts contain clear change-of-control clauses that allow the agreements to remain active after an acquisition. By presenting a buyer with a portfolio of locked-in, recurring revenue contracts, you drastically reduce their perceived risk and command a premium multiple at closing.